How to Plan for Retirement
Retirement planning sounds daunting, but it reduces to a short chain of questions: how much income you’ll want, how much you already have coming in, and the nest egg required to fill the gap. Get those right and the rest is steady saving and sensible accounts.
This guide covers the accounts that do the heavy lifting — 401(k), IRA and their Roth versions — the tax decision behind them, when and how to claim Social Security, required minimum distributions, and how to turn a balance into income that lasts. Run the numbers as you go.
By Diane Okafor · Reviewed by the FinCalculators editorial team
Updated June 18, 2026
How much you actually need
Your savings target isn't a magic number — it's a short calculation. Start with the annual income you'll want (often 70–80% of today's), subtract guaranteed income like Social Security and any pension, and size your nest egg to fund the remaining gap.
A quick estimate: multiply that income gap by 25 (the 4% rule). A $36,000 gap implies roughly $900,000. The nest-egg calculator does it precisely, and how much you really need to retire walks the full chain.
| Step | Example |
|---|---|
| Income you want | $60,000/yr |
| − Social Security | −$24,000/yr |
| = Gap to fund | $36,000/yr |
| × 25 (4% rule) | ≈ $900,000 |
How much to save along the way
That nest-egg target can feel abstract at 30. A simpler way to stay on track is a salary multiple — roughly how many times your annual income you'll want saved at each age:
These are signposts, not laws, and they assume steady investing in tax-advantaged accounts. If you're behind, catch-up contributions after 50 and a higher savings rate close the gap faster than you'd think.
| Age | Target saved |
|---|---|
| 30 | ~1× salary |
| 40 | ~3× salary |
| 50 | ~6× salary |
| 60 | ~8× salary |
| 67 | ~10× salary |
The accounts that do the work
Most retirement saving happens inside tax-advantaged accounts. A 401(k) comes through your employer with high contribution limits; an IRA (traditional or Roth) you open yourself with more investment choice. Both shelter growth from tax along the way.
The single best move is capturing your full employer match first — it's an instant ~50–100% return you can't get anywhere else. See why in is your 401(k) match free money, and model it in the 401(k) calculator.
A simple contribution order keeps you efficient:
- 401(k) up to the full match — free money first.
- Max an IRA (Roth or traditional) for more investment choice.
- Back to the 401(k) up to its higher limit.
- An HSA if you're eligible — a stealth retirement account.
Roth vs. traditional: the tax decision
Every tax-advantaged account gives you a break — the only question is when. Traditional contributions are pre-tax (a deduction now, taxed in retirement); Roth contributions are after-tax (no break now, tax-free later). The winner depends entirely on whether your tax rate will be higher today or in retirement.
Roth tends to win for younger, lower-bracket savers; traditional for high earners who'll drop a bracket later. When unsure, split between them. The Roth vs traditional calculator and our full breakdown settle it for your numbers.
RMDs and turning savings into income
Once you retire, the job flips from saving to withdrawing — sustainably. The 4% rule is the classic starting guideline, and the retirement income calculator shows what a balance can safely provide.
Mind required minimum distributions (RMDs): traditional accounts force taxable withdrawals starting at 73, whether you need the money or not. Roth IRAs don't, which gives you valuable control over your taxable income in retirement.
How much do I need to retire?
Start with the annual income you’ll want, subtract guaranteed income like Social Security, and size your nest egg to fund the remaining gap — roughly 25× it (the 4% rule), or precisely with present-value math. Our nest-egg calculator does both.
Roth or traditional — which is better?
Roth wins if your tax rate will be the same or higher in retirement; traditional wins if it will be lower and you invest the upfront tax savings. When unsure, splitting between them hedges your bet.
When should I claim Social Security?
Claiming at 62 permanently reduces your benefit; waiting until 70 increases it about 8% a year. The right age depends on your health, finances and other income — our benefit calculator estimates each scenario.
How Much Do You Really Need to Retire?
The honest answer isn't a single magic number — it's a calculation you can run in minutes. Here's the income-first framework, the 4% rule, and a worked example you can copy.
By Diane Okafor Read article
Is Your 401(k) Match Really 'Free Money'? Yes — Here's the Math
An employer 401(k) match is the closest thing to free money in personal finance. Here's how matching formulas work, what vesting means, and what skipping it quietly costs future you.
By Diane Okafor Read article
Roth vs Traditional: The Decision, Settled
It comes down to one question — will your tax rate be higher now or in retirement? Here's the dollar math, the Roth perks beyond taxes, what to do if you earn too much, and why diversifying wins.
By Diane Okafor Read article
The 4% Rule, Explained (and Its Limits)
The 4% rule is the most famous shortcut in retirement planning. Here's where it comes from, how to use it both directions, and why it's a starting point — not a guarantee.
By Diane Okafor Read article
Social Security and when to claim
Social Security replaces about 40% of pre-retirement income for an average earner — a foundation, not the whole plan. The age you claim changes the benefit permanently: take it at 62 and it's reduced; wait toward 70 and it grows roughly 8% a year.
There's no universally right age — it depends on your health, other income and whether you're still working. Estimate each scenario with the benefit calculator before you decide.